Listen to a Business English Dialogue About Reverse repurchase agreement
Edward: Hey Paisley, have you heard about reverse repurchase agreements?
Paisley: Yes, Edward. It’s when an investor purchases securities from a financial institution with an agreement to sell them back at a higher price later.
Edward: That’s correct. It’s a way for financial institutions to borrow money by using securities as collateral. Do you know why they’re called “reverse” repurchase agreements?
Paisley: I think it’s because it’s the opposite of a traditional repurchase agreement, where the financial institution sells securities with an agreement to buy them back later. It’s like the roles are reversed.
Edward: Exactly. Reverse repurchase agreements are often used by financial institutions to manage their short-term liquidity needs. They provide a way to access cash without having to sell off long-term assets.